Our studies have concerned regulation of gene expression during normal and abnormal differentiation processes. We have shown that adult rat liver contains low levels of three alpha fetoprotein (AFP) mRNAs of 2.2, 1.7, and 1.5 kb. The 2.2-kb AFP mRNA is expressed mainly in fetal rat liver. The 1.7- and 1.5-kb transcripts share a common 3' sequence with the 2.2-kb RNA, but lack sequences present in the first seven 5' exons of the 2.2-kb AFP mRNA. A cDNA clone encoding the 1.7-kb AFP mRNA has been isolated from an adult liver cDNA library. This cDNA shares similar sequences to the 2.2-kb AFP mRNA at the 3' region, but contains a 90-bp 5' sequence which is absent from the 2.2-kb mRNA. The 90-bp, 1.7-kb AFP mRNA-specific sequence is located in the seventh intron of the fetal rat AFP gene. Primary fetal rat hepatocytes were employed to examine factors required to promote liver differentiation in vitro. In the absence of effectors, primary fetal hepatocytes dedifferentiated. Cells maintained in the presence of glucocorticoid hormone or cAMP produced high levels of albumin and transferrin or albumin and AFP respectively. Both glucocorticoid and cAMP induced expression of adult liver-specific genes, suggesting that these fetal hepatocytes have matured. Our study demonstrated that both glucocorticoid hormone and cAMP are necessary for optimal differentiation of fetal hepatocytes in vitro. cDNA clones encoding human pregnancy-specific Bl-glycoprotein (PSBG) have been isolated and characterized. The amino acid sequence of PSBG as deduced from the cDNA sequence contains two repeated protein domains of 93 amino acids each. PSBG exhibits a strong homology to human carcinoembryonic antigen (CEA) at the nucleotide and amino acid levels. Both proteins contain structurally similar domains and conserve the positions of the cysteine residues in each domain. However, PSBG does not contain a hydrophobic carboxyl-terminal domain. Our data indicate that PSBG and CEA are two members of the same gene family. Differentiation of ts adult rat hepatocytes depends upon the presence of glucocorticoid hormone, as characterized by the expression of liver-specific genes such as albumin and tyrosine aminotransferase gene (TAT) in the presence of this hormone. These cells contain high levels of retinoic acid receptor mRNA and the addition of retinoic acid inhibits the glucocorticoid-mediated differentiation processes.